U.S. stocks clobbered; Dow off 513 points

Blue chips hit with worst one-day point decline since December 2008

KateGibson

NEW YORK (MarketWatch) — U.S. stocks were clobbered Thursday, thrusting Wall Street into correction mode, as investors compiled a lengthy list of concerns about the U.S. and global economy.

“We’re just worrying ourselves to death,” said Bruce McCain, chief investment strategist at Key Private Bank. “How do you get out of this roller coaster of the relentless onslaught of bad news?”

The three benchmark stock indexes all lapsed into negative territory for the year; oil dropped sharply on thoughts of reduced global demand; and gold sank as investors cut holdings to cover stock positions. Treasurys and the dollar rallied.

The Dow Jones Industrial Average
DJIA, -0.46%
dropped 512.76 points, or 4.3%, to 11,383.68, with all 30 components losing ground and the index down 1.7% for 2011. The index’s point drop was its worst since December 2008 and its percentage drop was the steepest since February 2009 — both low points of the credit and financial crisis.

Kraft Foods Inc.’s
KFT
stock was the sole Dow gainer for much of the session, but it turned lower as broad losses mounted. The food giant said it planned to split into two publicly trading companies. Read more on Kraft.

Off 4.6% for the year, the Standard & Poor’s 500 Index
SPX, -0.45%
declined 60.27 points, or 4.8%, to 1,200.07, with the natural-resource and energy sectors hit the hardest among its 10 industry groups. It was the worst percentage loss since February 2009.

Down 3.6% for the year, the Nasdaq Composite Index
COMP, -0.56%
shed 136.68 points, or 5.1%, to 2,556.39, its worst percentage loss since January 2009.

All three indexes are now at least 10% from their bull-market closing highs, translating to what many analysts consider a correction.

Fear flags fly

“There’s a lot of uncertainty here,” said Howard Silverblatt, senior index analyst at Standard & Poor’s, who listed as an emerging concern the idea that corporations might have to scale back expectations for the third quarter.

What’s behind plunging stocks?

(6:49)

Dave Kansas looks at the factors driving Thursday's dramatic selloff that pushed the Dow Jones Industrials down more than 500 points.

“If the Street numbers are too high, with the third quarter projected at record levels, if that has to be taken down at the last minute, the last remaining support beam is being pulled away,” said Silverblatt.

One market strategist said both Main Street and Wall Street are suffering from crisis fatigue after “two weeks of Washington putting us over the edge” before reaching a deal to hike the federal debt limit.

The economic concerns are new only in that Wall Street had been fixated on the debt battle in Washington, and once the threat of a government default was no longer an issue, “it’s back to basics, and that’s the economy,” said Silverblatt.

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